Government to have say in VSNL cash use after sale

NEW DELHI: The Indian government will have a say in how state-run telecoms

giant Videsh Sanchar Nigam Ltd. (VSNL) uses its huge cash surplus even after the

firm is privatized, the disinvestment minister said on Wednesday.

The government plans to sell a 25 per cent stake along with management

control from its 52.97 per cent holding to a private strategic partner in the

New York Stock Exchange-listed VSNL and another 1.97 per cent to VSNL's

employees.

VSNL, a monopoly overseas telecommunications carrier and also India's biggest

Internet access provider, has a cash surplus of Rs 15 billion with it, even

after a special interim dividend announced last week. "The government would

(still) be a partner in VSNL. So I am sure VSNL's board will decide,"

Disinvestment Minister Arun Shourie said on Wednesday when asked if the new

management would be free to use VSNL's cash hoard.

"There have been no restrictions even in the past for VSNL to enter new

businesses," Shourie told reporters on the sidelines of a business seminar.

Last Friday, VSNL's board recommended the special interim dividend of Rs 75 per

share to distribute Rs 23.56 billion from the company's cash pile of Rs 40-45

billion ahead of its privatization, expected by late December or early January.

Potential bids for the government's 25 per cent stake will be influenced by

how the new management will be able to access the firm's cash hoard.

VSNL's privatisation, billed as India's most ambitious yet in a decade of

economic reforms, has entered its last lap with the government expected to call

for price bids from suitors in the last week of December.

It was the second time this year the company has declared a huge dividend to

its shareholders. In July, it announced a dividend of Rs 50 per share which

included a special dividend of Rs 40. VSNL shares closed nearly nine percent

lower at Rs 205.75 on Wednesday at the Mumbai exchange while the benchmark index

finished 2.19 per cent down.

The firm is slated to lose its monopoly over the overseas calls business next

April 1, when the government has promised to throw open the business to

unlimited private competition.

(C) Reuters Limited.